Sustainable Product-Service System Design from a strategic sustainable development perspective

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Master’s Degree Thesis

Examiner: Henrik Ny Ph.D.

Primary advisor: Matilda Watz

Secondary advisor: Yannick Wassmer

Sustainable Product-Service System Design from a strategic sustainable development

perspective

Luca Rota Yanjun Zhou Svenja Paege

Blekinge Institute of Technology Karlskrona, Sweden

2019

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Sustainable Product-Service System Design from a strategic sustainable development

perspective

Luca Rota Yanjun Zhou Svenja Paege

Blekinge Institute of Technology Karlskrona, Sweden

2019

Thesis submitted for completion of Master of Strategic Leadership towards Sustainability, Blekinge Institute of Technology, Karlskrona, Sweden.

Abstract

Although they lead to several potential sustainability benefits, product-service systems are not intrinsically sustainable. Therefore, this thesis investigates the factors designers should consider in order to ensure sustainable results. A systematic literature review on product- service system and sustainability is combined with three interviews with product-service system providers. The results are analysed through the application of the Framework for Strategic Sustainable Development. The results of the systematic literature review show that there is no unified definition of sustainable product-service system and multiple approaches to address sustainability in product-service system design. By adopting the Framework for Strategic Sustainable Development, a definition of sustainable product-service system and a list of design criteria are developed. This thesis suggests which overarching aspects product- service system designers should consider to integrate a strategic sustainability perspective.

The outcome of this thesis supports designers in understanding what a sustainable product- service system could be and what elements it should embed. By combining the definition and the list of criteria, designers can apply a systematic and strategic approach to integrate sustainability in product-service system offerings.

Keywords: Product-service system (PSS); Sustainability; Framework for the Strategic Sustainable Development (FSSD); Systematic Literature Review; Sustainability criteria

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Statement of Contribution

The interest in product-service systems and the conviction that PSS is a suitable business model which leads businesses to become sustainable brought us as a group together. The initial purpose behind this thesis work was to deliver useful insights or even a tool that can help researchers and practitioners to understand and tangibly address sustainability within PSS.

We had a good balance between group work and individual work. We had regularly meetings where we updated each other, discussed about the next steps and divided the tasks. Overall, we were a diverse team, coming from different cultures and with different academic backgrounds.

This diversity allowed us to combine our strengths and to investigate the same topic adopting multiple perspectives. Discussions in the research process within the group helped to minimize biased data collecting and bias within the analysis of the result. The whole thesis process was an experience of learning from each other and finding a way of working as a diverse team with different backgrounds together. We all worked on the systematic literature review which was a highly complex process and required a lot of effort from us as a team.

Luca has a background in Management Engineering. He has a pragmatic way of structuring information which is influenced by his Engineering background. His analytical way of thinking and structuring information enabled him to develop the matrix for our analysis of the results.

Furthermore, he was actively creating space for discussions and developing new ideas. Many ideas are built on initial thoughts from him. He took a leading role in the development of the overall direction of the thesis. His engaging attitude and his strong but sincere pushing kept us as a team going forwards in our whole thesis process.

Adrian has a background in Mechanical Engineering. He has the ability to find the right information that were needed for the research. Especially during the process of the systematic literature review he did a lot of research. He was always the calm haven in terms of group dynamics and supported the group in finding the shared mental model that was needed in order to continue the work.

Svenja has a background in Business and Management. Her critical reflections on ideas and her critical thinking helped to find the overall research direction and ensured that the group was on the right track by moving forwards. During discussions she was a good counterpart for Luca to confer some creative friction. She took main responsibility in scheduling the interviews with the companies, conducting the interviews and the transcriptions. Regarding group dynamics, her sensibility and her kind attitude ensured to keep a balance regarding group dynamics.

Luca Rota Yanjun Zhou Svenja Paege

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Acknowledgements

First and foremost, we would like to thank our first advisor Matilda (Watz). She has always been available, carefully following the whole process that led to the realization of this thesis.

Through her knowledge and expertise in the research field she has contributing pro-actively to the outcome of this work. Her support and critical reflections were essential for finalizing this thesis. Despite the many challenges we have faced, she has always been a great motivator, bringing out the best in us. We feel so grateful to have had her as our first advisor, the best advisor ever.

Secondly, we thank all the interviewee who freely dedicated us their time. The work that they are doing inspired us and gives hope that businesses more and more see sustainability as important factor to be integrated in practice. Without their knowledge, this thesis would have not been as valuable as it is.

We would also like to thank Yannick (Wassmer) our second advisor who, in spite of the other multiple theses he was supporting, he has always found the time to support us. His suggestions for how we could improve our work as a team together helped us to identify the individual strengths for each team member and how we could integrate them as best as possible in our whole thesis process.

We would also like to thank Merlina (Missimer) for her helpful insights on the use of the FSSD.

Her feedback gave us confidence in how we approached our analysis and final results.

We are also grateful of the expertise and support of Marco Bertoni on the topic of PSS. He laid the foundation for this thesis and contributed through valuable feedback and guidance.

Furthermore, we want to thank Karl-Henrik Robèrt for the precious feedback which oriented this thesis as well.

A big thank goes also to the MSLS staff and our MSLS classmates. Being part of this master’s program is like being part of a big family. The support, learnings and many new bonds with amazing people general throughout the year will accompany us for the rest of our lives. We will never forget how supportive every one of them was throughout the whole thesis process.

Amongst all we would like to mention Arne, Chrissy and Arturo who provided us with helpful feedback. Besides them, we would like to thank Dan, Viliana, Anna, Akash and Hrishabh who freely dedicated their time to helped us and gave some final feedback which was very helpful for finalizing this thesis.

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Executive Summary

This thesis explores how sustainability should be addressed when developing sustainable product-service systems from a strategic sustainable development perspective.

Introduction and theoretical background

Humankind is facing environmental and social sustainability challenges, such as water scarcity, resources overexploitation, poverty, war and so on. These sustainability challenges are undermining the capacity of the socio-ecological system to support human life on the planet (Robèrt et al. 2018). This context calls for a transition to a more sustainable society, able to meet its needs without compromising the ability of future generations to meet their own needs (Brundtland 1987; Broman and Robèrt 2017). However, sustainability challenges are interconnected, influencing each other and are difficult to overcome (Williams et al. 2017).

Furthermore, the current economic system contributes in many ways to these challenges. Linear business models based on a take-make-waste approach lead to a massive extraction of materials from natural resources, extensive use of materials, water and energy during production and overconsumption from consumers (Willard 2012). Product-service system (PSS) is an academically recognized alternative business model that is able not only to enhance competitiveness, but also to contribute positively to sustainable development (Tukker and Tischner 2006, Vezzoli et al. 2015). Despite the fact that PSS is often seen as a sustainability solution, the development of PSS is not intrinsically sustainable. In fact, there are also cases in which PSS causes higher environmental impacts than a traditional production system (Tukker and Tischner 2006; Vezzoli et al. 2014; Ceschin 2014; Barquet et al. 2016;). Therefore, sustainability needs to be addressed for the development of sustainable PSS in a strategic way (Pigosso et al. 2010).

This thesis was based on the Framework for Strategic Sustainable Development (FSSD). The FSSD is a science-based conceptual framework which offers a definition of sustainability through eight sustainability principles. These principles act as boundary conditions within organizations strategically outlining sustainable scenarios of success (Robèrt et al. 2018). The FSSD was selected because it addresses sustainability systematically and strategically, thus conferring to its user a strategic sustainable development perspective.

This research aims to develop a definition and a set of criteria that could support designers in developing sustainable PSS. For this reason, the primary research question for this thesis is:

What are the factors that need to be considered by a PSS design team to create a sustainable PSS solution? Since it addresses different topics, the research question was broken up into two secondary research questions: What is the definition of a sustainable PSS that integrates a strategic sustainable development perspective? and What are the critical elements firms need to consider in the design of a PSS to comply with this definition?

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Research Design

This study was based on a two-stage research design. A systematic literature review was identified as suitable method for collecting the data needed. With the gathered data, it was possible to describe the current state of the research regarding the definitions of sustainable PSS. Furthermore, criteria that are considered in the academic field to develop a sustainable PSS were identified. Starting from a list of 516 articles, 24 articles were selected through a double screening process.

At the same time, this thesis attempts to integrate the perspective of companies which offer a PSS. In order to obtain insights into how sustainability is approached in PSS design, and which factors companies consider, semi-structured interviews were conducted.

For analysing both the current research and insights from the interviews, a combination of structured and open coding was adopted. For the structured coding an analysis-matrix was developed based on the systems view of sustainability offered by the Framework for Strategic Sustainable Development (FSSD). Besides the structured coding, an open coding approach was conducted in the analysis of the interviews in order to identify patterns characterizing the business perspective.

Results

As a result of the performed systematic literature review, no unified definition of sustainable PSS emerged. 15 diverse definitions of sustainable PSS and 18 different sets of criteria outlining the concept of sustainability for PSS were identified. The criteria were clustered for sustainability dimensions, generating four categories of criteria: environmental, social, economic and additional. From the interviews, three supplementary definitions and three supplementary sets of criteria were found.

Results analysis and discussion

The definitions and criteria were analysed through the application of the FSSD. Further, the definitions were assessed from systems perspective to see how they address the concept of sustainable PSS. Then the criteria were filtered and clustered, adopting the eight sustainability principles as categories. Finally, the criteria that resulted from the interviews were integrated.

As an outcome, a new definition of sustainable PSS, which integrates a strategic sustainable development perspective, was developed. A sustainable PSS is defined as a PSS designed within robust sustainability constraints providing benefits to stakeholders during its entire life- cycle. The key features of a sustainable PSS on which the definition was built are: being aligned with the eight sustainability principles, being economically beneficial, integrating a stakeholders’ perspective and considering the entire life-cycle. For the development of the definition, only those definitions conferring a holistic perspective to the concept of sustainable PSS were used. Afterwards, a list of 20 environmental and 21 social design criteria is proposed.

The list of criteria addresses all those aspects impacting sustainability which designers should consider when developing a sustainable PSS.

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Conclusion

By combining the definition and the list of criteria, designers can apply a systematic and strategic approach to integrate sustainability in PSS offerings. The suggested definition provides designers with a systems perspective on sustainable PSS, putting emphasis on its interconnectedness within the socio-ecological system. With the criteria, practitioners have an overview on which factors they need to consider for developing a PSS that is within the eight sustainability principles. Opportunities for additional researches are also reported.

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Glossary

Backcasting: A planning method adopted in complex systems which starts with a vision of success. Based on the vision of success, strategic step-by-step actions are planned towards that vision (Robèrt et al. 2018).

Five-Level Model (5LM): A conceptual framework which is designed for having a shared language when planning, acting and decision-making in a complex system. The framework consists of five interrelated levels: system level, success level, strategic guidelines level, actions and tools level (Robèrt et al. 2018).

Framework for Strategic Sustainable Development (FSSD): An overarching framework proposing a unifying and operational definition of sustainability, and a systematic approach to fulfil it (Brӧman and Robèrt 2017). It is based on the application of the Five-level Model to sustainable development (Robèrt et al. 2018).

Funnel Metaphor: An approach to visualize through the closing walls of a funnel, the degradation of the socio-ecological system by society’s current unsustainable practices (Robèrt et al. 2018).

Holistic: The term holistic is used for describing approaches or actions that are concerned on the wholeness of a system rather than its individual parts (Cambridge Dictionary n.d.).

Linear business model: a business that transforms inputs into finished products or services and sells those to the consumer. It is a business model based on a linear supply chain (Johnson 2017).

Products: “Anything that can be offered to a market for acquisition, use or consumption that could satisfy a need or want” (Claessens 2015).

Product-Service System (PSS): A combination of tangible products and intangible services which aims to meet specific customer needs (Tukker 2004).

Service: “A special form of product which consists of activities, benefits or satisfactions offered for sale that are intangible and do not result in the ownership of anything” (Claessens 2015).

Social life-cycle assessment: “It’s a method that aims facilitating companies to conduct business in a socially responsible manner by providing information about the potential social impacts on people caused by the activities in the life-cycle of their product” (Dreyer, Hauschild, and Schierbeck 2006).

Socio-ecological system: A combined system formed by the complex interactions between biosphere and society (Robèrt et al. 2018).

Stakeholders: A person, group or organization that has an interest or concern into an organization. Stakeholders can either be affect by or have an impact on organization's actions, objectives and policies (Landau 2017; BusinessDictionary, n.d.).

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Strategic Sustainable Development (SSD): The term Strategic Sustainable Development derives from the FSSD. Sustainable Development becomes Strategic when it is planned foreseeing and preventing unexpected consequences on the socio-ecological system (Brӧman and Robèrt 2017). The SSD is based on the understanding of the sustainability challenges and scientific approaches to help society strategically approach the sustainability with integrating a systems perspective (Robèrt et al. 2018).

Sustainability challenge: “The combination of the systematic errors of societal design that are driving humans’ unsustainable effects on the socio-ecological system and the serious obstacles to fixing those errors” (Robèrt et al. 2018).

Sustainable development: According to Brundtland’s statement (1987), “Sustainable development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.

Sustainability Principles (SPs): The sustainability principles are scientific-based basic conditions society must comply with to preserve the socio-ecological system (Robèrt et al.

2018).

Sustainability Sub-optimization: Unsustainable unintended consequences that derive from actions lacking system perspective (Byggeth and Hochschorner 2006; Dijkman, Rödger, and Bey 2015).

Systems Perspective/ thinking: A holistic approach to deal with complex systems which allows detect the single elements of a system and think of how they interact with each other as a whole (Robèrt et al. 2018).

Triple-Bottom-Line (TBL): “It is a framework that incorporates three dimensions of performance: social, environmental and financial. The TBL dimensions are also commonly called the three Ps: people, planet and profits” (Slaper and Hall 2011).

Value Creation: “The performance of actions that increase the worth of goods, services or even a business” (BusinessDictionary, n.d.).

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List of Abbreviations

8SPs Eight Sustainability Principles PSS Product-Service Systems

FSSD Framework for Strategic Sustainable Development

5LM Five-Level Model

RQ Research Question

SLR Systematic Literature Review SP Sustainability Principle SSD Strategic Sustainable Development

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List of Figures and Tables

Figure 1: The Funnel metaphor (adopted from Robèrt et al. 2018) ...1

Figure 2: The Five-Level Model & The Framework for Strategic Sustainable Development (FSSD) (Robèrt et al. 2018) ...6

Figure 3: Triple-nested systems model (adopted from Willard 2010) ...7

Figure 4: Interactive Design Model for Qualitative Research (adopted from Maxwell 2013) ... 11

Figure 5: Systematic literature review process ... 14

Figure 6: Business Model and PSS within the triple-nested system ... 18

Figure 8: Final list of environmental and social criteria ... 39

Table 1: Sustainability Principles (Robèrt et al. 2018) ...8

Table 2: Research Design ... 12

Table 3: Stages of systematic literature review (Mallet et al. 2012) ... 13

Table 4: Anagraphical information of the articles ... 20

Table 5: Criteria 'Sustainability model' ... 21

Table 6: Criteria covering the definition of sustainable PSS ... 21

Table 7: Criteria covering the Stakeholder and life-cycle ... 22

Table 8: Criteria of the sustainability dimensions ... 22

Table 9: Additional criteria to have a business perspective for sustainable PSS ... 22

Table 10: Three types of articles identified through SLR-process ... 23

Table 11: Numbers of criteria identified through systematic literature review ... 24

Table 12: Description of sustainable PSS from the interviews ... 25

Table 13: Similar criteria identified in interviews ... 25

Table 14: Criteria mentioned in one out of three interviews ... 26

Table 15: Analysis of the academic definitions of sustainable PSS ... 28

Table 16: Environmental criteria list derived from literature review ... 31

Table 17: Social criteria list derived from literature review. ... 33

Table 18: Criteria redefined after the interviews ... 37

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1. Introduction and Theoretical Background

The current economic system is in many different ways contributing to sustainability challenges like resource scarcity, environmental pollution, overconsumption, poverty and inequality. To transform the economic system, and encourage a sustainable development, new business models are needed.

1.1 Sustainability Challenges

Humanity is facing sustainability challenges. The exponentially increasing degradation of the ecological system is growing the risk of tipping the biosphere into a state where it will no longer be able to support human life (Willard 2012; Steffen et al. 2015). At the same time, society is facing social sustainability challenges. Amongst them more than one billion people are still living under the poverty line, and income inequality is increasing within many countries across the world (World Economic and Social Survey 2013). According to Keeley (2015) in the 1980's, the income of the wealthiest ten percent was on average seven times higher than the income of the poorest ten percent. Today, more than 30 years later, it is nine and a half times higher.

For understanding and visualizing the gravity of the sustainability challenges that humankind is facing, the funnel metaphor (displayed in Figure 1) could be used. On the one side, natural resources and ecosystem services that support human life are decreasing. On the other hand, the human population and the consumption of resources and materials are increasing. Those two general trends combined lead to growing pressures on society regarding environmental, social and economic issues. (Broman and Robèrt 2017, p. 21).

Figure 1: The Funnel metaphor (adopted from Robèrt et al. 2018)

The narrowing wall of the funnel is visualizing the boundaries for the secure space for humankind and represents the progressively degrading socio-ecological system. As described

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by Robèrt et al. (2018), the existing capacities of both the planet and society to sustain civilization are systematically degrading due to the unsustainable practices of our society.

Linear business models (also known as the take-make-waste business model), that most companies have adopted today, are one of the main drivers of the sustainability challenges (Willard 2012; Ceschin 2014). Being based on systematic overconsumption of natural resources, these business models lead to the degradation of the biosphere through (Willard 2012):

1. the systematic increase in concentration of substances from the Earth crust, such as heavy metals and fossil fuels;

2. the systematic degradation of the biosphere through physical means, such as deforestation and over-harvesting;

3. the systematic generation of waste produced by society, like chemicals and dioxins.

Simultaneously, linear business models cause negative impacts also on the society, as they contribute to abuses of political and economic power preventing the satisfaction of basic human needs such as clean air, potable water, nutritious food and quality of life (Willard 2012).

Being sustainable is critical and will become even more critical for businesses and organizations to survive over time (Robèrt et al. 2018). In particular for businesses, being unsustainable may generate e.g. costs due to adapting to new environmental policies and legislation. In order to cope with the environmental and social sustainability challenges, countries all over the world are establishing strict regulations for businesses (Chierici and Copani 2016) and promoting mindful and transparent practices in businesses by introducing reporting on sustainability (Fernandez-Feijoo, Romero, and Ruiz 2014, p. 54). Furthermore, companies which continue their unsustainable practices might be affected by increasing financial impacts through higher and even unpredictable costs for scarce natural resources (França et al. 2017).

Being unsustainable as business can also cause risks of losing customers or market shares to competitors who adopt more sustainable practices (França et al. 2017; Robèrt et al. 2018). The market demand for sustainable products and services is also increasing (Lin, Tan, and Geng 2013, p. 102). On the other side, integrating sustainability may also mean to drive innovation opportunities and possibilities for gaining market shares (Willard 2012; Broman and Robèrt 2017). In other words, unsustainable activities may generate in the long-term severe concerns for companies to survive on the market. Therefore, businesses need to integrate strategically sustainability into their purposes and practices.

The sustainability challenges are complex: social and ecological aspects are interconnected in a complex way (Robèrt et al 2017). Sustainability issues, consequently, can only be solved by focusing on the root of the problem, inducing a need for a radical transformation (Missimer 2015). In other words, for a full transition towards sustainability, a radical change in the way current society produces, consumes and lives is required (Vezzoli 2017). Therefore, there is a need to transition from the current state to a sustainable society that is able to satisfy the present needs without compromising the ability of future generations to meet theirs (Brundtland 1987).

Given the complexity of the sustainability challenges, businesses must adopt an overarching transformative change. This kind of transition is defined as Sustainable Development (Robèrt et al. 2018). Given the critical role that companies and organizations play in our society and their contributions to the sustainability problems, they can take a lead in the transition to a sustainable society (Willard 2012). Hence, it is imperative to radically change the current linear business models, to protect the ecosystem, improve the efficient use of resources, narrow the wealth gap and reduce social inequality. Therefore, manufacturers and service providers must

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shift from the linear business models to business models that have more potential to be sustainable (Willard 2012). Thus, reflecting not only on the production processes but also thinking about the consumption, people’s lifestyles and their access to goods and services. To develop appropriate solutions that addresses the complexity of the sustainability challenges in a systematic way, businesses must adopt a strategic approach (Baumgartner and Korhonen 2010). Strategic sustainable development becomes therefore a critical approach to move businesses towards a sustainable future.

1.2 Product Service Systems and Sustainability

Product-services system (PSS) is recognized as an alternative business model that not only enhances competitiveness but also has the potential to contribute to sustainable development by addressing production processes, the provision of products and services and redesign consumption behaviour (Tukker and Tischner 2006; Vezzoli et al. 2015).

A Product-service system can be described as “the result of an innovation strategy, shifting the business focus from designing and selling physical products only, to selling a system of products and services which are jointly capable of fulfilling specific client demands” (Manzini and Vezzoli 2002, p. 4). Tukker and Tischner (2006) distinguish between three categories of PSS: (1) product-oriented, (2) use-oriented and (3) result-oriented. According to Baines et al.

(2007), in a product-oriented PSS, the ownership of a product is at the side of the customer and the related services, which include the installation, maintenance, repair, upgrading and recycling of the product as well as the consultancy and training for using the product, are provided by the PSS provider. Regarding the use-oriented PSS, the ownership of the product belongs to the PSS provider and the customer needs to pay for the service of using this product.

The last and third category of PSS, the result-oriented PSS, can be described as a tool to reach a specific desired outcome. This is enabled through an agreed function of the PSS between the provider and the customer.

Although PSS emerged as a sustainable solution, the development of PSS is not intrinsically sustainable and there are cases in which PSS causes higher negative environmental impacts than a traditional business model (Tukker and Tischner 2006; Vezzoli et al. 2014; Ceschin 2014; Barquet et al. 2016;). PSS can require high levels of transport intensity, which is not compensated by the other environmental advantages (Ellger and Scheiner 1997; Graedel 1997).

Examples come from the food industry: convenience meals produced in centres for preparation and then transported in cooling chains can provide high value for the customers increasing its quality of life, but there is a negative impact on energy consumption (Tukker and Tischner 2006). Another example is connected to chemical management services (CMS). In order to extend the life-cycle of their offerings, PSS can introduce chemicals which are more resistant and long-lasting but also more toxic (Tukker and Tischner 2006).

PSS can positively address economic, environmental and social benefits. From an economic point of view, PSS has the potential to generate multiple advantages. Tukker and Tischner (2006) suggest three advantages with PSS. First, PSS is tailored for the customer needs, and therefore, it leads to a higher level of customer loyalty, strengthening and extending the relationship between customers and businesses. Secondly, this long-term relationship improves innovation, as PSS-provider and clients can co-create solutions that can address current needs or problems by developing alternative or new solutions compared to the traditional product offering. Also, compared with standard product-manufacturing, PSS potentially improves the strategic position of the firm in the value chain, by integrating activities which are closer to the

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customer and have higher profit margins. Based on different research studies, Ceschin (2014) points out that businesses which offer a product-service system can generate competitive advantages on the market.

Along with economic advantages, PSS potentially leads to both environmental and social benefits. On the customer side, the costs related to the acquisition, use, maintenance and product replacement can potentially lower (Manzini and Vezzoli 2002). Whereas the service provider is stimulated to use and maintain better the equipment increasing both its efficiency and effectiveness (Pigosso et al. 2010). Therefore, PSS may require less material and energy in the development phase in comparison to the standard product offerings. Furthermore, when the PSS is use-oriented, PSS providers are responsible for the whole life-cycle encouraging the re- use of the product at the end of its life ensuring less waste (Manzini and Vezzoli 2002; Tukker and Tischner 2006). Moreover, PSS encourages the adoption of a leaner production approach (Tukker and Tischner 2006), avoiding over-production and reducing the need for warehouses, avoiding their environmental impacts. Hence, PSS has the potential to play a critical role in tackling overconsumption as it can lead the transition from product ownership to service-based products, by directly impacting customer behaviours from single-use product consumption towards shared economy (Sora et al. 2012).

PSS offers social benefits by offering new job roles for PSS implementation leading to opportunities for employment and by increasing the quality of life and the well-being of customers (Manzini and Vezzoli 2002; Tukker and Tischner 2006). As PSS models sell access rather than mere product ownership, they could lead to increased accessibility to groups with lower purchase power, as a lower cost per use replaces a higher full product purchase cost (Vezzoli et al. 2018). Therefore, use- and result-oriented PSS represents an opportunity “to respond more easily to unsatisfied social demands with lower overall costs” (Manzini and Vezzoli 2002).

As highlighted above, PSS has the potential to generate economic, environmental and social benefits for both developers and users leading the society in the direction of sustainability, but this potential must be addressed strategically (Pigosso et al. 2010). Ensuring that the benefits are achieved simultaneously in the environmental, social and economic dimension for the whole PSS lifecycle the integration of sustainability in the design is critical (Pigosso et al. 2010). In fact, the design determines the whole life-cycle of the product and its relative impacts on both the environment and society (Waage 2007). Therefore, the design process is one of the most influential factors when developing sustainable PSS since the impacts or effects are more significant as sooner sustainability is considered in the development (Sousa-Zomer and Cauchick-Miguel 2017).

However, as reported by the analysis of Pieroni et al. (2017), only a minority of PSS design frameworks include activities, methods or tools supporting the development of PSS while integrating both the environmental and the social dimensions of sustainability strategically.

Even though there are already criteria assessing the sustainability of PSS into the design, most of them are focused on the dimension of environmental sustainability, e.g. eco-design principles (Pigosso et al. 2010; Sora et al. 2012). Therefore, there is a need for a comprehensive framework able to address the sustainability potential of PSS in the design from a systems perspective.

1.3 Framework for Strategic Sustainable Development

Leading the transition towards a more sustainable society is a complex task that requires collaboration amongst experts across multiple sectors and disciplines (Broman and Robèrt 2017). For this reason, Broman and Robert (2017), aimed to establish a shared language and a

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systematic approach in dealing with sustainability. This involved developing what is known as the Framework for the Strategic Sustainable Development, (FSSD) (Broman and Robèrt 2017).

Due to its potential in addressing sustainability and in conferring a Strategic Sustainable Development perspective to its users, the following thesis was based on the FSSD. FSSD is a scientifically recognized framework specifically developed to consider the complexity of sustainability, through adopting a systems perspective (Broman and Robèrt 2017). The FSSD can help organizations to understand the sustainability challenge and the related opportunities and benefits of proactivity. Furthermore, it supports organizations to incorporate a systems perspective and supports planning towards sustainability, e.g. through informing decision- making by assessing potential practices. For increasing the effectiveness of complementary tools and methods for strategic sustainable development, the FSSD offers guidance in selecting, developing and combining those tools and methods (Robèrt et al. 2017). The FSSD adapts the Five-Level Model, a model which supports planning and acting in complex systems, and integrates a sustainability development planning approach (Robèrt et al 2018).

The Five-Level-Model

Transitioning to a sustainable society is a difficult task, which requires many disciplines and sectors to collaborate. The question is, how it can be possible to convene these various sectors to achieve this objective. The Five-Level Model (5LM) is a framework which offers a structure for information in a way that makes it useful for planning in a complex system based on system thinking. Furthermore, it can be used to analyse any complex system, and it is designed for problem analysis, decision-making, planning for investment programs, as well as supporting the development of strategic action plans. This model helps to assess information through five categorical levels. The system level of the 5LM is where the planner places all information about a given system. The success level defines the overall goal that needs to be achieved in order to have a successful planning process. The strategic guidelines level is about choosing concrete actions as part of an overall strategic plan to accomplish the goal. The actions level describes concrete actions that are chosen to move towards the success defined on the success level based on the overall strategic guidelines. The tools level supports the planning and implementation to reach the vision of success. (Robèrt et al. 2010, p. 25-29). By applying the SSD perspective into the 5LM it refers as the Framework of Strategic Sustainability Development (Robèrt et al. 2010, p. 34). Therefore, the FSSD provides a platform which responses to the vagueness and uncertainty in planning towards sustainability, and provides a common language and understanding, to facilitate people towards sustainability (Broman and Robèrt 2017).

Figure 2 gives an overview of each level of the 5LM and how they become the FSSD through the application of an SSD perspective. After the figure, each level of the FSSD is explained further.

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6 The Five-Level

Model with Explanations

The Framework for Strategic Sustainable

Development

System: The system that is relevant to the overall goal/ success.

The global socio- ecological system (society

within the biosphere); An overview of the sustainability challenge.

Success: The definition of success.

A sustainable society (one that complies with the Sustainability principles).

Strategic guideline:

The strategic guideline used to select actions that

move towards success in the

system.

Backcasting from success;

A decision structure that enables strategic

prioritization.

Actions: The concrete actions that follow the

overall strategic guidelines to reach

success.

The concrete actions that are implemented to move

towards a sustainable society (success).

Tools: The tools that support the planning.

The tools that support efforts to reach sustainable society

(success).

Figure 2: The Five-Level Model & The Framework for Strategic Sustainable Development (FSSD) (Robèrt et al. 2018)

System Level

One of the key features in the system level of FSSD is the global socio-ecological system. “The global socio-ecological system is the biosphere and society interacting in a complex way to form a combined system” (Robèrt et al. 2010). The triple-nested-systems model illustrates the three pillars of sustainability: environmental, social, economic (Figure 3). Noticeably, the economic system is a subsystem and is nested in the larger social and environmental system, while it is entirely dependent on the continuation of these two systems. In other words, companies are unable to exist on its own. Companies and society depend entirely on the availability of natural resources. Sufficient food, clean and fresh water are essential for human beings’ existence. Similarly, companies also require the resources from nature to continue their daily operations. This indicates a strong dependency of the economic system on the environmental and societal system which makes it clear that companies cannot survive segmented from what is known as the socio-ecological system (Willard 2010; Robèrt et al.

2018).

Integration of SSD perspective

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Figure 3: Triple-nested systems model (adopted from Willard 2010)

Success Level

The FSSD offers a definition of sustainability through the adoption of eight sustainability principles, criteria that act as system boundaries for both the ecological and social dimensions in a theoretically sustainable scenario (Robert et al. 2018). By having a vision within those boundaries, sustainable development can be achieved (Missimer 2015).

The eight sustainability principles consist of three ecological principles and five social principles (table 2). Regarding the ecological SPs, the term “systematically increasing” is used and refers to the systematic degradation of the biosphere. The three ecological principles represent three basic mechanism how society is harming the biosphere by either increasing the concentration of natural and synthetic waste or degrading the nature by physical means (Robèrt et al. 2018). The concept of “structural obstacles” is often associated with the social sustainability principles. This concept refers to social constructions within society regarding political, economic and cultural factors that are difficult to overcome or avoid by the people that are affected by them. Structural obstacles are an accumulated amount of activities of social unsustainable behaviour which leads to a deeply rooted negative impact on society. Therefore, the usage of the term “structural obstacles” is essential when defining the social sustainability principles (Missimer 2015).

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Table 1: Sustainability Principles (Robèrt et al. 2018)

Sustainability Principle

Explanation

SP1 The amount of substances from the earth's crust aren’t introduced in a way which leads to a systematic increase of the concentration of these substances. An example of those kinds of substances would be crude oil from the lithosphere.

SP2 Substances produced by society such as chemicals like Nitrogen oxides are used in a way through societal activities that don’t lead to a systematic increase of these kinds of substances in the biosphere.

SP3 The biosphere is not systematically degraded by physical means. Examples for activities that would be a misalignment with this principle are overfishing overharvesting of forests.

SP4 People are not subject to structural obstacles to health. This means that people are not exposed to social conditions that systematically undermine their possibilities to avoid injury and illness either physically, mentally or emotionally (e.g. dangerous working conditions or insufficient wages).

SP5 People are not subject to structural obstacles to influence. This means that people are not systematically hindered from participating in shaping the social systems they are part of (e.g., by suppression of free speech or neglect of opinions).

SP6 People are not subject to structural obstacles to competence. This means that people are not systematically hindered from learning and developing competence individually and together (e.g. by obstacles for education or insufficient possibilities for personal development)

SP7 People are not subject to structural obstacles to impartiality. This means that people are not systematically exposed to partial treatment (e.g. by discrimination or unfair selection to job positions).

SP8 People are not subject to structural obstacles of meaning-making. This means that people are not systematically hindered from creating individual meaning and co- creating common meaning (e.g. by suppression of cultural expression or obstacles to co-creation of purposeful conditions).

Strategic Guidelines Level

The strategic guidelines level includes guidelines for identifying the most strategic actions for reaching the vision of success (Broman and Robèrt 2017). These actions are developed through backcasting from principles and selected through a prioritization process (Robèrt et al 2018).

Backcasting from principles is a planning process which defines a vision of success adopting basic principles as constraints and supports to identify the gaps between the current state and the envisioned future. In the FSSD, the eight sustainability principles are adopted as basic principles for backcasting (Robèrt et al. 2018).

In order to achieve the vision of success outlined through backcasting, actions bridging the gaps between the current state and the envisioned future are planned. All actions need to be in

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alignment with the 8SPs. The FSSD offers three criteria for prioritizing actions. First, an action should be a flexible platform on which other possible actions can be built on to reach the vision. Second, an action should help to reach the vision as soon as possible. And third, an action should lead to returns on investment for the organisation (Robèrt et al. 2018).

The Actions Level

The actions level gathers all those concrete actions defined in the strategic guidelines level supporting organizations in moving towards their envisioned future (Robèrt et al. 2018).

The Tools Level

The tools level examines all those tools potentially supporting organizations in the application of the FSSD. The tools are chosen in alignment with the system level, the success level, the strategic guidelines level and the actions level (Robèrt et al. 2018).

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1.4 Aims, Scope and Research Question

To give more clarity to businesses in how to integrate sustainability into a PSS, a set of guidelines could support PSS practitioners to integrate strategic sustainability in the design.

Therefore, a definition of sustainable PSS must first be developed to provide a shared vision to guide practitioners in the development of sustainable PSS and provide awareness of the sustainability impacts through offering a PSS solution. Through reviewing literature, it was discovered that there are multiple definitions of sustainable PSS. Therefore, research would benefit from a common understanding of what a sustainable PSS is, in order to channel the research into a common direction. A definition of sustainable PSS based on the literature, coupled with a strategic sustainable development and a business perspective, would allow the establishment of a foundation for possible strategic guidelines for the design of sustainable PSS.

Guidelines could support design teams in systematically integrating sustainability into PSS design. Therefore, this thesis aims to create a shared understanding of sustainability by formulating two aims. The first aim is to propose a definition of sustainable PSS derived from theory and practice, and the second aim is to provide a set of criteria that guides design teams towards complying with this definition. Since the initial aim of this research is to develop a definition of sustainable PSS, the system level from the FSSD is used to assess the definitions of sustainable PSS emerged from the literature. For assessing the criteria for developing a sustainable PSS emerging from literature and practice, the success level of the FSSD is used.

As this research is developing a foundation for future developments of guidelines, the strategic guideline, action and tools level are not addressed any further throughout this research.

As PSS is gaining more and more attention as one possible solution in the transition towards sustainability, the target audience of this thesis is both researchers in the field of sustainable PSS or sustainable business models, and practitioners in terms of PSS designers and providers.

Given the aims and intended audience, the study is based on a systematic literature review on academic publications and complemented with interviews with industry representatives. The results are analysed with a lens of strategic sustainable development.

The primary research question guiding this thesis, is

What factors need to be considered for a PSS design team to create a sustainable PSS solution?

Due to its complexity while addressing different topics, the research question is divided into two secondary questions. Furthermore, the research design is based on the following secondary research questions:

Secondary research Question 1: “What is the definition of sustainable PSS integrating a strategic sustainable development perspective?”

Secondary research Question 2: “Which critical elements may firms need to consider in the design of a PSS to comply with this definition?

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2. Research Design

For answering the research questions presented in the previous section, a qualitative study was designed, which was structured by adopting the model from Maxwell (2013). This model offers a structure with five different areas, which are interconnected. It allowed to design a research process that is iterative and multi-directional rather than linear and inflexible. This allowed the researcher to reflect on the research process and progress consistently while allowing for adaptation to ensure the alignment throughout the four different areas (Figure 4). In order to answer the research question presented in the previous section, the following research methods were selected.

Figure 4: Interactive Design Model for Qualitative Research (adopted from Maxwell 2013) This study was based on a two-stage research design. This involved an inductive approach known as qualitative research. The aim of this approach was to develop concepts, insights and understandings based on patterns found in the investigated data (Taylor, Bodgan, and DeVault 2016). A systematic literature review was identified as suitable method for collecting data for both describing the current state of research regarding the definitions of sustainable PSS and identifying criteria that are considered in theory to develop a sustainable PSS. At the same time, this thesis attempted to integrate the perspective of practitioners. In order to gain insights into how sustainability is approached in PSS design, and which factors companies consider, semi- structured interviews were conducted. For analysing both the current research and insights from the interviews, a combination of structured and open coding was adopted. The codes for analysing the data are based on a system view of sustainability and were derived from elements of the Five-Level Model of the Framework for Strategic Sustainable Development (FSSD). The description of how the 5LM from the FSSD is applied to this study can be found in section 2.3.1. Furthermore, the description of the analysis matrix can be found in section 2.3.1 and 2.3.2. Each of the steps of the research design of this study is summarized in the following table.

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Table 2: Research Design

Data needed Method Outcome

Answer to research Question

Data Collection

State of research about the definition of

sustainable PSS Systematic literature

review

State of the Art of definitions for sustainable PSS

Secondary RQ 1

Criteria considered for developing a sustainable

PSS in research

State of the art of criteria for sustainable PSS

Secondary RQ 2

Economic/ business perspective on how sustainable PSS is defined in practice

Semi- structured Interviews

Insights from practice

on sustainable PSS Secondary RQ 1 Criteria considered for

developing a sustainable PSS in practice

Criteria from practice for developing a

sustainable PSS Secondary RQ 2 Data

Analysis (Framework Analysis using FSSD)

Outcome from systematic

Literature Review Structured and open coding

(Codes derived from

FSSD)

Proposal of definition of sustainable PSS

and set of criteria

Primary research question Outcome from Interviews

2.1 Systematic Literature Review

Gough et al. (2017, p. 2) describe a systematic literature review as “a review of existing research using explicit, accountable rigorous research methods’” which enables the researcher to identify all available studies related to a topic of interest. A systematic literature review is considered as secondary data, based on the collection of primary research (Kitchenham 2004). For conducting a consistent systematic review, the process should to comply with specific core principles such as the four described by Booth et al. (2016): transparency, replicability, clarity and auditability.

According to Kitchenham (2004), there are three reasons for conducting a systematic review.

A systematic review can summarize existing knowledge in the research gathered so far. By systematically reviewing existing research, it is possible to identify gaps and propose suggestions for future investigation. Additionally, a systematic review can provide a consistent background, giving a solid foundation for new research avenues. Therefore, the above rationales for conducting a systematic literature review can be applied to this research as well.

There is rich literature on PSS already, including a range of frameworks and design techniques with several definitions of sustainable PSS, relying on different models for considering and evaluating sustainability (e.g. triple-bottom-line). By carrying out systematic research, this study aims to identify the relevant existing knowledge on the topic, then summarize and analyse it in order to answer the primary research question. The structured and consistent procedure a

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systematic review follows reduces the bias of the researchers and ensures that the data are collected in a plausible way (Booth et al. 2016).

Mallet et al. (2012) describe one possible process of conducting a systematic literature review with the following six steps (table 3).

Table 3: Stages of systematic literature review (Mallet et al. 2012)

Stage in the Systematic review

Description

1) Define research Question

Constructing a research question which serves as a basis for the search string in the literature search.

2) Develop protocol Create a protocol that describes search string, search strategy, inclusion and exclusion criteria and an approach for the synthesis.

3) Actual search Conduct the systematic search: the studies are retrieved from the chosen database(s); all studies found are included at this stage.

4) Screening Screening of the all retrieved studies, screened regarding the relevance of title, abstract and full text, by using predefined inclusion and exclusion criteria. Consistency is ensured through piloting with all researchers screening the same studies and then comparing the results.

5) Final list of relevant research

Once screening has been completed, the studies that are included in the final analysis.

6) Synthesis The final stage involves the extraction of relevant quantitative and/or qualitative data in order to synthesize the evidence.

The two secondary research questions framed the systematic literature reviews. A protocol, including a search string and inclusion and exclusion criteria, was developed. Based on preliminary research, key concepts and related terms were developed for creating the string.

Boolean operators were adopted for the development of the string: tailoring the string to the topic of this thesis ensured the comprehensiveness of the research (Olson and Allen 2018). The criteria for inclusion and exclusion were based on the research question and the developed key concepts. Then the string was applied in the chosen database. The database used for this systematic literature review is SCOPUS because it is currently the largest peer-reviewed articles database (Elsevier n.d.). Two screening phases were conducted in order to ensure the integration of all relevant articles. The first screening phase consisted of superficial screening of the abstract, introduction, results and a brief skimming over the whole article based on a first set of criteria. The second screening was more detailed with an in-depth investigation if the article would help to answer the secondary research questions. After those two screening phases, a final list of relevant articles emerged and were prepared for the analysis. The final step was a synthesis to present the results from the systematic review.

A detailed explanation of the steps and outcomes of the systematic literature review follows in section 3.1.

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The systematic literature review process comprised three phases: the string line development, the first screening and the second screening (figure 5). Each phase is further explained in this chapter.

Figure 5: Systematic literature review process String line development

Key concepts emerged by exploring well-known academic publications in the field of PSS and sustainability. These were categorized into four main categories of concepts. The four categories are “PSS”, “sustainability”, “design” and a particular category clustering a wider range of words which was named as “other”. Thereafter, synonyms and related terms were added based on the concepts. For example, for the category of PSS, terms like “servitization”

or “integrated products” were added to the more common “Product Service Systems” and “PSS business model”. Regarding the concept of “sustainability”, terms like “environmental factor”

or “social effect” were gathered in order to ensure that articles related to sustainability without explicitly mentioning it are also covered. In this way, a table of all the key concepts and related terms needed for the development of a robust research string line was systematically created.

The concept table can be found in the appendix E.

The resulting string lines were tested in the database SCOPUS. SCOPUS was selected due to its reliability and recognition as the most extensive database for peer-reviewed articles (Elsevier n.d.). Each string line was assessed, firstly, by looking at the number of articles covering in the database. Secondly, it was verified if those strings were covering the five specific articles which emerged from the preliminary literature investigation as the most representative of the research topic.

TITLE-ABS-KEY ( ( PSS OR "Product-service System" OR "functional product" OR serviti?ation ) AND ( "Environment* impact*" OR "Social impact*" OR sustainab* ) AND ( assess* OR evaluat* OR measur* OR definition OR framework ) ) OR TITLE-ABS- KEY ( "Sustainable PSS" OR "sustainable product-service system" )

Two queries compose the string line. The first one was developed by targeting those articles focused, on the theme of PSS and sustainability assessment (as allowed by the operator TITLE- ABS-KEY). In detail, this query addresses the articles which mention the topic of PSS also in the forms of “functional product” and “servitization” or “servitisation”. Amongst these articles, only those explicity mention sustainability or consider it through the keywords of

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environmental and social impact are selected. Finally, the query filters only those articles which include an assessment, a definition or a framework. The second query was structured to include all those articles, not covered by the first query, mentioning explicitly in the title, abstract or in the list of keywords the concept of sustainable PSS. By undergoing the string line into the database, the initial list of articles to be considered for the systematic literature review was generated. As a note, the key concept category regarding the design emerged from the preliminary literature investigation, was excluded from the string line and integrated into the process of selection of the articles as a filtering criterion in the further steps of the literature review instead.

First screening phase

In order to identify the most suitable articles from the literature, two screening phases were conducted. In the first screening phase, all the articles and books found were listed in one shared Excel spreadsheet. Twenty-seven papers were directly excluded because they were conference papers. After that, the most relevant articles were identified based on three key criteria “PSS”,

“Sustainability” and “Design”. An article which considered all three aspects was recognized as more likely to contain the information needed for answering the primary research question. The criteria “PSS” was needed because there were also articles found through the string which contained the acronym PSS as well but were related to medical terminology or PSS for “Product Stewardship Strategy”. Therefore, these criteria helped to identify the articles that were related to PSS as a business model. The criteria “Sustainability” was fulfilled when an article discussed PSS in the context of sustainability, e.g. if it mentioned how PSS contributes to sustainability.

The criteria “Design” was covered when an article was considered to be an assessment or guidelines for design to a certain degree.

The articles were evenly distributed between the team members. To ensure that the screening was done in the same way by three different individuals, a common assessment process was developed which consisted of the three following steps: reading the summary of the article, reading the introduction and the conclusion of the article and screening the rest of the article.

Based on the information identified through this process, it was assessed which of the three criteria was fulfilled by the article. If all three criteria were fulfilled, the article became part of the second screening phase. This process of screening and assessment reduced the number of articles which moved on to the second, more in-depth screening. From 516 initial articles, 113 articles were identified and underwent a second screening.

Second screening phase

The second screening was an in-depth screening. The team read the articles thoroughly and searched for either a definition of sustainable PSS or clear criteria which needed to be fulfilled to have a sustainable PSS. By including both, the articles which contained a definition of sustainable PSS and also the articles that delivered criteria for making a PSS sustainable, data were gathered which answered both secondary research questions. In some articles, the use of a definition of sustainable PSS from another source was recognized. In those cases, the articles were excluded. To ensure that the final list of articles for the analysis was chosen based on a common mindset in the group, group meetings were scheduled to discuss the inclusion and exclusion of articles. Clear rationales were presented on why specific articles were included or excluded in the final list for the analysis. At the end of this step, the final collection of articles was identified and became part in the analysis. The second screening phase reduced the list of articles from 113 to 24 final articles.

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2.2 Semi-structured Interviews

As a complementary method to the systematic literature review, semi-structured interviews were conducted to obtain a business perspective on the research topic to answer the main research question. Semi-structured interviews are a mix of prepared questions and unprepared questions which enable the interviewer to be flexible in the conversation and adapt to the interviewee (Austin and Sutton 2014, p. 438).

One benefit of semi-structured interviews is the possibility to tailor the questions in relation to the level of interaction with the interviewee and to the emergence of additional sources of knowledge that were not considered during the preparation of the interviews (Savin-Baden and Howell Major 2013). Having a standard protocol of questions that were prepared beforehand, enabled the research group to touch on all the topics of the investigated interests to ensure that data were gathered in order to answer the sub-research questions and the collected information were complete and consistent. As information is collected through a conversation with the interviewee, it helped to get an understanding of the investigated topic (Harell and Bradley 2009). The prepared questions of the interview can be found in the appendix F.

These interviews were structured with the aim to understand how companies approach PSS and sustainability together in the development of those system solutions. Furthermore, the intention was to identify specific criteria adopted by those companies to address and evaluate sustainability in the early design or development stage of their PSS offering. Primary data collected through interviews was needed due to the lack of such data in existing researches investigating if companies see a difference in PSS and a sustainable PSS and how they approach this difference. Furthermore, this study wants to create a shared understanding of sustainable PSS in research and practice. The interviews were needed to gain this understanding from the practice of sustainable PSS, which is needed to answer the primary research question.

Therefore, only representatives from businesses who were committed to sustainability were interviewed. This means the research group talked to people aware of the topic thus ensuring valuable findings for the research question. Also, by gathering knowledge from practitioners, this research ensured to include a business perspective on the topic of sustainable PSS. In approaching businesses, the research team did not provide in advance a definition of sustainable PSS and did not introduce the concepts of FSSD to them. That approach was adopted to minimize risk of bias and thus to maximize the reliability and validity of collected data from the different practitioners interviewed.

The interviews were carried out with representatives of three different companies which offer a PSS solution. A stratified purposeful sampling approach was applied to select companies and interviewees (Voss 2009). In practice, this meant that the thesis supervisor connected the thesis team with suitable interviewees. The companies that participated in the interviews were all in the manufacturing business but with different products and service solutions. Either they were offering a product-oriented PSS or a use-oriented PSS. The companies operated in the construction machine industry, aerospace industry and the furniture industry. The interviews were conducted involving three representatives of those described companies who are responsible for integrating sustainability into the operations of their company and who had been involved in the development of the PSS solution. Based on the primary research and secondary research questions, especially the secondary research question number two was the frame for the preparation of the semi-structured interview questions. The questions were divided into main questions that should be asked during the interview and questions that served as probes.

All the information that emerged from the interviews was collected through recordings, which

Sustainable Product-Service System Design from a strategic sustainable development perspective

Master’s Degree Thesis

Sustainable Product-Service System Design from a strategic sustainable development

perspective

Luca Rota Yanjun Zhou Svenja Paege

Sustainable Product-Service System Design from a strategic sustainable development

perspective

Luca Rota Yanjun Zhou Svenja Paege

Statement of Contribution

Acknowledgements

Executive Summary

Introduction and theoretical background

Research Design

Results

Results analysis and discussion

Conclusion

Glossary

Table of Contents

List of Abbreviations

List of Figures and Tables

1. Introduction and Theoretical Background

1.1 Sustainability Challenges

1.2 Product Service Systems and Sustainability

1.3 Framework for Strategic Sustainable Development

1.4 Aims, Scope and Research Question

2. Research Design

2.1 Systematic Literature Review

2.2 Semi-structured Interviews